Growth Codes - presentation
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With the mobile business in a state of transformation - new players, operator and vendor mergers - Ericsson set out to answer the question: what makes a mobile operator successful? Working with EY, Ericsson has been able to identify and explain each of the 3 different strategy options that successful mobile operators, called Frontrunners, adopt.
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Growth Codes - presentation
- 1. Growth codes Extended strategies edition
- 2. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 2 More subscriptions, more traffic More Services Mobile subscriptions LTE HSPA 10 9 8 7 6 5 2 4 3 1 0 + 2.4 billion Monthly traffic (per application type) 0 15 000 5 000 20 000 10 000 25 000 30 000 Globalmobiletraffic (Petabytes/month) 2014 2020 Video (55%) Social networking (15%) Web browsing (5%) 8X Audio (2%) Source: Ericsson Mobility Report 2014
- 3. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 3 But who is making money ON IT?
- 4. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 4 An Extended group of frontrunners keeps growing › 20 Frontrunners show revenue growth of 9.6% CAGR* › Revenues of peers grows with 2.7% CAGR › The rest at -1.4% CAGR *) Yearly Revenue Growth Indexed, 2010 = 100 Ericsson analysis based on data from Strategy Analytics Reference Year 2010 20142013201220112010 The rest Peer Frontrunner Index 2010 = 100
- 5. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 5 The Study 270 operators Financial Analysis 20 Front Runners Strategic Analysis 30 operators Growth Codes Operator Strategies
- 6. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 6 Leading Revenue Growth Frontrunners identified Evaluated and identified based on 3 key parameters ~5% or higher Full Year Growth >25% non-voice revenues in last quarterPositive EBITDA Profitable Data centric
- 7. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 7 Different strategies in different markets Source: Ericsson EMEAAMERICAS APAC Quality led Market led Offering led
- 8. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 8 Different strategies in different markets Source: Ericsson Quality led Market led Offering led EMEAAMERICAS APAC
- 9. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 9 Interviews Information
- 10. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 10 What have they done to be that successful?
- 11. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 11 Innovating new revenues Connectivity and Services as differentiators Connectivity and Services as commodities Market & Tech Synergies Market & Tech Silos Maximizing old revenues Problem Focused Opportunity Focused Frontrunners think differently Shift of mindset
- 12. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 12 The Growth Codes “Streetwise Metrics” Measure and Manage User Experience “Co-Partnering” Create Strategic Partnerships for Innovation “Unboxing” Create Innovative Offerings “Showcasing” Market your Performance Leadership “Eco-systematic” Embrace Innovation “Gap Minding” Create Performance Gap to Competitors Drive Usage Monetize Usage
- 13. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 14 The Value chain for investment
- 14. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 15 Is there a common strategy behind their success?
- 15. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 16 Frontrunners apply a dual approach to growth Strategies for current growth Existing Markets & Existing Capabilities New Markets and/or New Capabilities Strategies for future growth › IoT & Vertical solutions › Cloud & ICT services › Expand operations and footprint (e.g. through M&A, geographical expansion or alliance) › Explore new business models , partnerships and services › Traditional telecom products & services › Present markets & segments
- 16. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 17 Differentiation Market scope Customer scope Product scope Technology & Operations How do frontrunners think differently? Offering-led transformation Quality-led progression Market-led adaptation
- 17. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 18 three Strategies to profitable growth › End-to-end customer experience focus › Selective distribution & campaigns › Segmented approach – often utilize sub brands › Fast followers on new products & services › Selected strategic partnerships › High focus on market innovation › One-for-all offerings and targeted distribution › First to market with new offerings › Several strategic partnerships › High focus on operational efficiency Offering-led Transfomation › Selective customer experience efforts & simplification focus › Extensive campaigns & promotions › Vast distribution network › Rely on extensive high-quality service portfolio & converged offerings › Few strategic partnerships - extensive own VAS offering Quality-led Progression Market-led Adaptation Differentiate on high-performing networks and brand preference Differentiate on uniquely designed offerings redefining customer value Differentiate on quick adaptation to market conditions
- 18. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 19 The Strategies leverage the growth codes “Streetwise Metrics” “Co-Partnering” “Unboxing” Create Innovative Offerings “Showcasing” “Eco-systematic” “Gap Minding” Quality-led Progression Differentiate on high-performing networks and strong brand preference Measure and Manage User Experience Create Strategic Partnerships for Innovation Market your Performance Leadership Embrace Innovation Create Performance Gap to Competitors Drive Usage Monetize Usage
- 19. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 20 The Strategies leverage the growth codes Quality-led Progression This type of strategy is driven by the ability to create a Network Performance gap to competitors in the market through the Gap Minding Code. This is coupled with the ability to “Showcase” this gap through a simple and understandable manner to the end-user. The effect of coupling those two codes together creates a Brand Preference to attract high ARPU segment. Further, to be able to attract consumers there needs to be a focus on creating Innovative Offerings that captures Customer Value effectively. Finally because this strategy creates a solid base for value creation, frontrunners deploying this strategy would be looking out for partners that share a common mind-set to advance innovation and build upon their respective expertise.
- 20. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 21 Frontrunners in practice American Operator › Significant lead in data coverage › Showcasing extent of coverage visually against the competitors Quality led Progression 36%revenue growth over 5 years
- 21. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 22 The Strategies leverage the growth codes “Streetwise Metrics” “Showcasing”“Gap Minding” Drive Usage Monetize Usage Market-led Adaptation Differentiate on quick adaptation to market conditions “Co-Partnering” “Unboxing” Create Innovative Offerings “Eco-systematic” Measure and Manage User Experience Create Strategic Partnerships for Innovation Market your Performance Leadership Embrace Innovation Create Performance Gap to Competitors
- 22. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 23 The Strategies leverage the growth codes Market-led Adaptation This type of strategy is driven by and understanding of market needs and end-user preferences. Frontrunners deploying such strategy will always look to understand, measure and manager User Experience through Streetwise Metrics. Because this type of strategy is quick to adapt to market conditions and the need of targeted segments, they need to showcase their User Experience to a selected set of segments. Their ability to mirror offerings that are successful as they are introduced by competitors but add value through further capturing some leftover customer need is vital to their success hence their application of the above codes in harmony.
- 23. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 24 Frontrunners in practice Global Operator › Fast follower › Tailored bundling for targetted segments › Innovative billing › Re-use strategy into other markets Market Led Adaptation 28%YoY subscriber growth in targetted segment
- 24. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 25 The Strategies leverage the growth codes Offering-led Transformation Differentiate on being first to market with uniquely designed offerings “Streetwise Metrics” “Showcasing”“Gap Minding” “Co-Partnering” “Unboxing” Create Innovative Offerings “Eco-systematic” Measure and Manage User Experience Create Strategic Partnerships for Innovation Market your Performance Leadership Embrace Innovation Create Performance Gap to Competitors Drive Usage Monetize Usage
- 25. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 26 The Strategies leverage the growth codes Offering Led Transformation This type of strategy is driven by the ability to be internally capable of researching, understanding and mirroring customer needs in the offerings presented. They do understand the need of creating a gap in terms of network performance but targeted towards the segments that that innovative offering is directly impacting. Their unboxing considers very strongly who the end-user is and how to deliver on a perceived high quality of service. They also do not consider the OTT players as a threat but leverages their offerings in expanding bundle variety to cater for a specific segment with more options within.
- 26. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 27 Frontrunners in practice Asian Operator › Embracing innovation › Improved brand sentiment & NPS through strategic partnering and improved network performance › Attractive data plans targetting pre-paid users Offering Led Transformation 13%YoY growth in total revenue
- 27. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 28 The Strategies put varying emphasis on the growth codes Offering-led Transformation Differentiate on being first to market with uniquely designed offerings Quality-led Progression Differentiate on high-performing networks and strong brand preference Market-led Adaptation Differentiate on quick adaptation to market conditions “Streetwise Metrics” Experience-centric KPI:s “Co-Partnering” Visionary Collaboration “Unboxing” Redefine Subscription “Showcasing” Quality-led Marketing “Ecosystematic” Open-ended Innovation “Gap Minding” Visionary Investing Lead by superior network performance Lead by innovative Marketing & Offering
- 28. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 29 Frontrunners emerging Strategy Type No. of frontrunners Offering-led Transformation Quality-led Progression Market-led Adaptation 2014 2015 20 30 est. Market Share No. of frontrunners 2014 2015 20 30 est. Market share position: #3 Market share position: #1 Market share position: #2 2013 12 2013 12
- 29. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 30 Successful Operators: Strategies & Growth codes UNDERSTANDING THE CUSTOMER ATTRACTIVE MARKET OFFERs › Frontrunners are outperforming their peers › ..and stimulating the market › Growth Codes 2.0 identifies clear strategies and tactics for success › The number of front runners is set to rise
- 30. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-30 | Page 31
Editor's Notes
- Reorganizing with an Introductory slide – Elaborate more on successful operators before moving into the specific Growth Codes and Tactics. Also the starting point for what we found next – 6 success factors of driving profitable growth through MBB. 6 behaviors that shape the future of telecom Balance between technology oriented and market oriented We call them “Growth Codes”. Would like to share and discuss them with you Introduce all 6 codes, just the names, related to the tech-market axis* Identify Successful tactics which we called GC1.0
- Additional detail around the 6 growth codes for reference to previous slide.
- We need to make sure that we don’t undermine the role of CAPEX and network performance In an Ideal world, the process is quite simple. Spill some CAPEX into your business and this will increase your Operational Performance which will just passively enhance your Market Performance leading to a higher financial performance. Let’s step back. Point 1 and Point 2 are agreed upon but by simply pouring CAPEX into your business does not necessarily mean you yield a lucrative ROI. The CAPEX put into the business needs to be harnessed in best ways possible. It’s quite important to point that without a an Innovative Marketing & Offerings approach, simply having a Superior Network Performance that is not displayed correctly will drive a slight growth while leaving a “a chunk” of money at the table to be picked up by other operators (Similar to a negotiation scenario were there is some money left on the table because the two parties couldn’t communicate correctly – lose-lose negotiations) . And through this presentation we will get to see how based on the Traits and Patterns of most successful operators, the Innovative Marketing and Offerings come hand in hand with the Superior Network Performance to deliver the message that there is a mutual understanding of the needs of consumer coupled with a Quality Network Performance to ensure the consumer and the operator both obtain the largest value per unit of concern. Business-as-usual capex, by contrast, is treated in a far less sophisticated way. The networks generally submit requests for RAN consolidation, core upgrades, additional carriers or whatever else they need to support an increase in traffic. But since the link between traffic and value has been broken at the planning stage, these capex proposals are effectively ‘technical costing’ papers based on the assumption that the additional traffic will be profitable. Of course most of the respondents in the survey recognize that not all traffic is equal. Yet, for many, this remains an intellectual fine point. The leading operators behave quite differently; they analyze their business-as-usual capex very carefully to make sure that it will create real value. In most companies, a network has to solicit support for its capex proposals from the product management, sales or marketing function. But it’s easy to get such support from a team that’s rewarded for increasing subscriber numbers, revenues and EBITDA. The resulting coalition—between a network that wants to maximise its operational performance and a marketing function that wants to maximise revenues—is therefore biased in favour of the proposal, whether or not it makes commercial sense. What’s more likely, as one respondent noted, is that about 70% of investments cover their cost of capital and about 30% generate very poor returns indeed. The difference is easy to explain. We calculate that most telecoms operators misallocate about 20-22% of their discretionary capex, but when you include the non-discretionary capex they’re required to make for regulatory reasons the percentage rises to about 30%. Reference: https://www.pwc.com/en_GX/gx/communications/publications/assets/pwc_capex_final_21may12.pdf Title: We need to talk about CAPEX Benchmarking best practice in telecom Capital Allocation Are they given a choice for any of the three other options given .